Every newbie asks, “what is binary options’ expiration?” In binary trading, the expiry date means the time of the option sale. A binary trader has to predict when the price of the asset will be above or below the current price. This differs from Forex binary options, where it’s not necessary to pre-fix expiration time.
How to determine the expiry time
Selecting the correct expiration time is a key task for each trader. There are many recommendations for the definition of this parameter, but many traders develop their own unique methodologies based on personal experience. One of the most popular is an algorithm consisting of the following stages:
• Define trading strategy and the principle of using signals;
• Choose the main timeframe and use signals that show the direction of the option purchase;
• Calculate the average between the signals for opening and closing (on the hourly chart, for example, we have eight candles);
• Correct expiry time will behalf of the previous value (in our case four hours).
So, the correct expiry time for us is four hours.
Consequently, the choice of the expiration time for options is significantly influenced by the strategy the trader uses.
Justifying this method
According to the statistics, we can see the strong motion of the trend only during half of its presence, then the trend begins to fade. The trader’s main objective is to catch the trend at the moment it moves, without rollbacks.
Another goal of the trader is to maximize the gap between the opening price and the expiry of the option to be fully confident of success. That is why experienced traders recommend using no less than one hour timeframes.
However, not all demo platforms offer longer expiration times than one hour. Most newbie trading options with expiry times from 15 minutes to one hour completely "lose" their deposits, even if trading with the trend. Therefore, establishing an effective method for determining the expiry time for binary options with a demo account is almost impossible.
The reason for this is obvious: in advance, brokers train traders to trade quickly, which, of course, can bring significant gains, but often leads to a complete loss of deposit. That's why brokers so actively advertise 60-second options, which may give results on a demo account, but in real trading, it’s a waste of money.
What do you think about this? What expiry time do you choose?
We can make the following conclusions:
• Even newbies can make a profit with the right approach and careful analysis;
• Expiry time of options should be determined based on strategy (in this case, it is best to avoid "fast" trading).
• The main advice is to critically check all recommendations offered by the broker, and use only the most convenient platforms(for example, MetaTrader 4).